Eliminate Taxpayer-Funded Housing for ‘Ministers of the Gospel’

A special tax exemption in the Internal Revenue Code allows a house of worship to provide one or more of its “ministers of the Gospel” to receive tax-free housing or tax-free income equivalent to the rental value of the clergy’s residence [1].   This housing income is not counted as part of the clergy’s income, and has been extended all those who perform ministerial duties, including sacerdotal functions, conducting religious worship, and controlling or maintaining religious organizations [2].  Clergy may also deduct their real estate taxes and mortgage interest from their taxes—as any taxpayer who owns a home may do. But clergy are allowed to do so even if the mortgage interest was paid with the tax-free housing income [3].  This is considered a “double-dip”, and is generally prohibited by the tax code.

When taxpayers who are not clergy receive income from their employers for any reason (for dancing lessons, a new car, or anything else), the Internal Revenue Service (IRS) requires the value of the item be counted as income. Non-clergy taxpayers receive no special exemptions for housing.

The rental value housing exemption originated in the 1950s during the Cold War when clergy, especially Christian clergy, were viewed as essential community support against Communism, and Congress sought to help small churches afford to keep their parishes and clergy afloat [4].  The question today is why should American taxpayers be funding a religious tax exemption at all? Shouldn’t a house of worship be able to afford its clergy on its own without special tax treatment from the government?

The housing exemption has no monetary limit or cap and is poorly regulated, and may extend beyond the organization’s actual clergy to anyone who assists in administering or maintain the organization—so long as the person is ordained or otherwise validly licensed to be clergy [5].  For example, 2010 bankruptcy court records show that eight Crystal Cathedral Ministries’ employees, including family members of the founder Robert A. Schuller, took flagrant advantage of this tax exemption [6].
According to bankruptcy court filings in California: [7]

  • Robert A. Schuller, the megachurch founder, received a $98,861 tax-free housing allowance annually.
  • A son and daughter of Schuller received tax-free housing allowances that totaled $236,768 annually.
  • Three of Schuller’s sons-in-law received tax-free housing allowances that totaled $306,093 annually.
  • Fred Southard, chief financial officer of Crystal Cathedral Ministries and who owns a home in Newport Beach, California, worth $2.3 million, received a tax-free housing allowance of $132,000 annually, and his son-in-law, a part-time pastor at the megachurch, received a tax-free housing allowance of $58,747 annually.

In the Crystal Cathedral Ministries case, the tax-free housing allowances totaled more than $832,000 annually. When the megachurch went bankrupt, the Schullers and top officials kept the money from the tax exemption.

The housing tax exemption was challenged in 2001 when the IRS claimed that the nearly $80,000 salary that Saddleback Church in California was giving its pastor, Rick Warren, who was then deducting that salary in its entirety as a housing allowance, exceeded the fair market value of Warren’s house [8].  Before the 9th Circuit Court of Appeals could rule on Warren’s case, Congress unanimously passed The Clergy Housing Allowance Clarification Act of 2002, which gave Warren and any other pastor who took liberties with their housing allowance deductions a pass, but instituted the “fair rental value” rule [9].  However, the law provides no cap on how much a clergy or house of worship may spend on clergy housing—leaving American taxpayers on the hook for untaxed income worth millions of dollars.

Secular nonprofit organizations are not eligible to provide a tax-free housing allowance for any employee (and shouldn’t be). The housing exemption for clergy is a religious-based subsidy paid for by the taxpayers.

The Secular Coalition for America believes the clergy housing tax exemption should be repealed because it violates the Establishment Clause—making taxpayers subsidize the housing of religious leaders. The Secular Coalition for America believes that all nonprofit organizations, religious and secular, should have the same tax and housing laws with regards to employees, including clergy.


[1] IRC § 107, Rental Value of Parsonages; Ministers’ Compensation & Housing Allowance, http://www.irs.gov/faqs/faq/0,,id=199753,00.html
[2] Publication 517, “Ministers,” http://www.irs.gov/publications/p517/ar02.html#en_US_2010_publink100033572
[3] Id.
[4] Chemerinsky, Erwin, “The Parsonage Exemption Violates the Establishment Clause and Should Be Declared Unconstitutional,” Duke Law Faculty Scholarship, Paper 737, http://scholarship.law.duke.edu/faculty_scholarship/737
[5] Publication 517, “Ministers,” http://www.irs.gov/publications/p517/ar02.html#en_US_2010_publink100033572
[6] “Crystal Cathedral Bankruptcy,” Los Angeles Times, http://documents.latimes.com/crystal-cathedral-bankruptcy/
[7] Id.
[8] Wiener, Jon, “Rick Warren’s Clout,” The Nation, Feb. 2, 2009.
[9] Id.


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